By authorizing certain kinds of trusts and providing other ways to shelter assets, a state can more easily attract lucrative trust business. States can also enact LLC statutes and other laws that help protect businesses and individuals. Physicians, business owners and others who are at high risk of being sued should explore asset protection alternatives in states that provide the best protection.

In other words, a person exploring asset protection options might choose to create a domestic asset protection trust in Ohio, based on Ohio’s comparatively “strong” laws, rather than proceeding in his or her home state, which may have weaker laws or may not allow at all for creation of domestic asset protection trusts.

Finally, the same rankings release provides this Comparison Map, illustrating that only a minority of states nationwide even allow for the creation of self-settled domestic asset protection trusts, such as the type of trusts allowed under Ohio law.

]]>https://www.assetprotectionlawjournal.com/2017/09/ohio-ranked-in-the-top-5-for-asset-protection-trust-laws/feed/0Settlor Can Retain a Lot of Control Over an Ohio Legacy Trusthttps://www.assetprotectionlawjournal.com/2016/10/settlor-can-retain-a-lot-of-control-over-an-ohio-legacy-trust/
https://www.assetprotectionlawjournal.com/2016/10/settlor-can-retain-a-lot-of-control-over-an-ohio-legacy-trust/#respondMon, 03 Oct 2016 18:40:23 +0000http://www.assetprotectionlawjournal.com/?p=978Continue Reading]]>As I previously noted in a post back in 2013, you can establish an Ohio Legacy Trust without giving up complete control of your assets. Your Trust must be irrevocable and you cannot serve as your own Trustee. But you can still maintain significant control over the assets in the Trust if you want to do so.

Ohio Revised Code §5816.05 specifically states that the Settlor (the person establishing the Trust) can reserve quite a few rights, including the right to:

veto distributions

remove the Trustee and appoint a new Trustee

remove any advisor and appoint a new advisor

receive trust income

Asset protection laws vary a lot from state to state. But the other fifteen or so states that have domestic asset protection trust statutes also have provisions allowing the Settlor to retain a variety of powers when establishing such a Trust.

]]>https://www.assetprotectionlawjournal.com/2016/10/settlor-can-retain-a-lot-of-control-over-an-ohio-legacy-trust/feed/0Living in One State and Setting Up a Trust in Anotherhttps://www.assetprotectionlawjournal.com/2016/07/living-in-one-state-and-setting-up-a-trust-in-another/
https://www.assetprotectionlawjournal.com/2016/07/living-in-one-state-and-setting-up-a-trust-in-another/#respondThu, 14 Jul 2016 15:35:36 +0000http://www.assetprotectionlawjournal.com/?p=954Continue Reading]]>

Can you set up a trust in a state that you do not reside in? The answer is yes. You can set up a trust in a country you do not live in. As a resident of Ohio, I can establish a trust in Delaware or Alaska or the Cook Islands or almost anywhere else. There are of course a number of factors to consider in deciding whether or not that makes sense. And when you do set up a trust in a state other that the state you reside in, there can be issues as to which state law applies to the trust. Attorneys refer to this as a “conflict of laws” issue. This issue frequently arises when a creditor tries to reach assets in a trust.

Section 273(b) of the Restatement (Second) of Conflicts of Laws says that the applicable state law should be the law of the state that the settlor has manifested an intention to apply. Comments to this Section says that naming as trustee a trust company of a particular state would indicate that state law should apply. Other “contacts” with a particular state would also be evidence of which law applies.

There can also be “public policy” issues. If your state has a strong public policy (for example, in favor of certain creditor or debtor rights), that can become relevant in a conflict of laws dispute.

For Ohio residents interested in asset protection, all of this is now much less of a concern than it used to be. We used to recommend that our clients consider setting up trusts and limited liability companies in Delaware and other states for asset protection purposes. But Ohio now has an excellent asset protection trust statute; an excellent LLC statute; and numerous statutory provisions that are debtor-friendly. So in most cases there is currently no need for an Ohio resident to set up a trust (or an LLC) in another state for asset protection purposes.

]]>https://www.assetprotectionlawjournal.com/2016/07/living-in-one-state-and-setting-up-a-trust-in-another/feed/0Trust Protectorshttps://www.assetprotectionlawjournal.com/2016/02/trust-protectors/
https://www.assetprotectionlawjournal.com/2016/02/trust-protectors/#respondTue, 23 Feb 2016 09:47:27 +0000http://asset.local.lexblog.com/2016/02/articles/uncategorized/trust-protectors/Continue Reading]]>For hundreds of years, trusts have had three key players. The settlor is the person who establishes the trust. The trustee is the person responsible for the operation of the trust. And the beneficiary is the person (or persons) who the trust is intended to benefit. Recently, a fourth role — that of the trust protector — has become increasingly important.

Trust protectors are a very important part of an asset protection trust. They are less common in a standard estate planning trust (but are increasingly used there as well).

The settlor of the trust chooses the initial trust protector. The powers of the trust protector will be determined by the terms of the trust, and in some instances by state statutes. A trust protector may have the right to remove the trustee, amend the trust, veto distributions, and can have various other rights and responsibilities. The trust protector is essentially someone who can make sure the trust is being administered the way the settlor intended. Thus, the trust protector is literally empowered to “protect” the trust.

Carefully picking the right trust protector for a trust is just as important as picking the right trustee.

]]>https://www.assetprotectionlawjournal.com/2016/02/trust-protectors/feed/0Keep Bankruptcy Code §548(e) in Mind if You Have a DAPThttps://www.assetprotectionlawjournal.com/2015/02/keep-bankruptcy-code-%c2%a7548e-in-mind-if-you-have-a-dapt/
https://www.assetprotectionlawjournal.com/2015/02/keep-bankruptcy-code-%c2%a7548e-in-mind-if-you-have-a-dapt/#respondFri, 27 Feb 2015 10:47:46 +0000http://localhost/wordpress/assetprotectionlawjournal/2015/02/27/keep-bankruptcy-code-%c2%a7548e-in-mind-if-you-have-a-dapt/Continue Reading]]>About 16 states now have laws that allow a Domestic Asset Protection Trust (DAPT). These trusts can be very useful to protect assets in many situations.

But keep in mind that a DAPT (like other asset protection strategies) is designed to protect your assets and keep you out of bankruptcy. It may be less useful if you actually file for bankruptcy.

§548(e) of the Bankruptcy Code gives a bankruptcy trustee the right to challenge a conveyance made to a DAPT within ten years of the time it is made. That is a long time. Outside of bankruptcy, a creditor would likely have nowhere near that amount of time to challenge a conveyance as being fraudulent. Moreover, a bankruptcy trustee may have a lot more power and resources to challenge alleged fraudulent conveyances than many creditors would.

So this is just a reminder that a DAPT may be significantly more vulnerable to an attack by a bankruptcy trustee than by a creditor outside of a bankruptcy situation. This is also a reminder to document transfers to a DAPT (with evidence of your solvency at time of transfer) in case the transfer is later attacked as being "fraudulent".

]]>https://www.assetprotectionlawjournal.com/2015/02/keep-bankruptcy-code-%c2%a7548e-in-mind-if-you-have-a-dapt/feed/0Two or More APTs May Be Advisable In Some Situationshttps://www.assetprotectionlawjournal.com/2014/10/two-or-more-apts-may-be-advisable-in-some-situations/
https://www.assetprotectionlawjournal.com/2014/10/two-or-more-apts-may-be-advisable-in-some-situations/#respondWed, 29 Oct 2014 11:26:53 +0000http://localhost/wordpress/assetprotectionlawjournal/2014/10/29/two-or-more-apts-may-be-advisable-in-some-situations/Continue Reading]]>In Ohio (as in other states that have enacted a Domestic Asset Protection Trust Statute), it may be advisable to have two or more trusts as part of an overall asset protection plan.

For example, a husband and wife may each want to have their own, separate Ohio Legacy Trust. Not only can this help to keep certain assets separate, but the respective trusts can then co-own other assets — like interests in an LLC. In many states, a multi-member LLC provides better protection than a single member LLC.

Keep in mind that this kind of planning — like all asset protection planning — requires careful attention to a wide variety of factors, including tax considerations. Many variables often need to be considered before deciding on a particular plan.

In any event, using more than one DAPT (just like using more than one LLC or other business entity) may be advisable in many situations.

An Ohio Legacy Trust will likely have no effect at all on your income tax situation. The trust will be structured so that it is a grantor trust pursuant to §677 of the Internal Revenue Code. It meets the requirements of this Code section because trust income may be distributed to the Grantor without the approval of any adverse party. In less technical terms — any income from the trust will simply be reported on your personal income tax return.

An Ohio Legacy Trust can also hold S Corporation stock because it is a grantor trust. There are certain limitations on what kind of entity can be an S Corporation shareholder. A grantor trust is one of the entities that can own S Corporation stock.

There are many considerations that go into setting up an Ohio Legacy Trust (or a domestic asset protection trust in any other state that allows one). But as long as the trust is properly drafted, you should not have to worry about its impact on your personal income tax situation.

]]>https://www.assetprotectionlawjournal.com/2014/09/ohio-legacy-trust-not-likely-to-affect-your-income-taxes/feed/0Mississippi is Latest State to Enact DAPT Statutehttps://www.assetprotectionlawjournal.com/2014/07/mississippi-is-latest-state-to-enact-dapt-statute/
https://www.assetprotectionlawjournal.com/2014/07/mississippi-is-latest-state-to-enact-dapt-statute/#respondTue, 01 Jul 2014 13:30:53 +0000http://localhost/wordpress/assetprotectionlawjournal/2014/07/01/mississippi-is-latest-state-to-enact-dapt-statute/Continue Reading]]>The Mississippi “Qualified Disposition in Trust Act” takes effect today. Mississippi has now become one of about fifteen states that have a domestic asset protection trust statute.

Each of these state statutes is different. But they all offer (with certain exceptions) an opportunity for creditor protection – – as long as appropriate formalities are followed.

This latest DAPT statute provides another reminder that asset protection is becoming more and more “main stream.” There should be no hesitation in making use of applicable asset protection laws that specifically allow you to better protect your assets.

]]>https://www.assetprotectionlawjournal.com/2014/07/mississippi-is-latest-state-to-enact-dapt-statute/feed/0Asset Protection Trust Should Have Provision Allowing Trustee to Change Situshttps://www.assetprotectionlawjournal.com/2013/12/asset-protection-trust-should-have-provision-allowing-trustee-to-change-situs/
https://www.assetprotectionlawjournal.com/2013/12/asset-protection-trust-should-have-provision-allowing-trustee-to-change-situs/#respondMon, 09 Dec 2013 09:43:24 +0000http://localhost/wordpress/assetprotectionlawjournal/2013/12/09/asset-protection-trust-should-have-provision-allowing-trustee-to-change-situs/Continue Reading]]>Earlier this year Ohio joined a number of other states that allow creation of a domestic asset protection trust. In Ohio, it is called an Ohio Legacy Trust.

Ohio law (just like the law of every other state) can change at any time. We currently anticipate no significant change in the new Ohio domestic asset protection trust statute in the near future. And even if there was a change in Ohio law, it is possible that existing legacy trusts would be “grandfathered.”

But since there can be no assurance that Ohio law will always remain as favorable as it is right now, we include a provision in our Ohio legacy trust to cover a change in Ohio law or policy. We provide that the trust can essentially be moved to another jurisdiction if necessary – – where hopefully there would be better protection at that time. We aim to provide the trustee and/or the trust protector with maximum flexibility to protect trust assets.

]]>https://www.assetprotectionlawjournal.com/2013/12/asset-protection-trust-should-have-provision-allowing-trustee-to-change-situs/feed/0Affidavit of Solvency is a Reminder to Plan Before You Have Creditor Problemshttps://www.assetprotectionlawjournal.com/2013/09/affidavit-of-solvency-is-a-reminder-to-plan-before-you-have-creditor-problems/
https://www.assetprotectionlawjournal.com/2013/09/affidavit-of-solvency-is-a-reminder-to-plan-before-you-have-creditor-problems/#respondMon, 16 Sep 2013 11:00:05 +0000http://localhost/wordpress/assetprotectionlawjournal/2013/09/16/affidavit-of-solvency-is-a-reminder-to-plan-before-you-have-creditor-problems/Continue Reading]]>Ohio Revised Code §5816.06 requires an affidavit of solvency each time you transfer assets to an Ohio Legacy Trust. This is a fairly standard provision for transfers to Domestic Asset Protection Trusts in other states as well. In Ohio, failure to timely file such an affidavit may be used as a basis for an action to set aside the transfer.

The affidavit of solvency required by Ohio Revised Code §5816.06 must state that:

The transferor is not made insolvent by the transfer

The transferor is not contemplating bankruptcy

There are no pending court actions other than those listed in the affidavit

It is often impossible to sign such an affidavit once you have serious creditor problems. So this statutory requirement is another reminder to do your asset protection planning before you have any significant creditor issues.